Financial Institutions Management: A Risk Management Approach 10th Edition by Anthony Saunders Test

 
B. To receive the benefits of diversification that households may not be able to achieve on their own.
 
C. The FI has can benefit from combining funds and negotiating lower asset prices and transactions costs.
 
D. The FI can provide insurance at relatively low cost that will protect funds under management.
 
E. All of the options.
 
81. Financial intermediaries are 
 
A. funds surplus units, because they exist to make money.
 
B. funds deficit units, because they must pay heavy regulatory fees and taxes.
 
C. funds surplus units, because they hold large portfolios of financial securities.
 
D. funds deficit units, because they must comply with minimum capital requirements.
 
E. neither funds surplus nor deficit units.
 
 
82. Which of the following observations is true? 
 
A. Central bank directly controls both inside and outside money.
 
B. Outside money is that part of the money supply produced by the private banking system.
 
C. Inside money refers to the quantity of notes and coin in the economy.
 
D. Bulk of the money supply consists of inside money.
 
E. Central banks cannot vary the quantity of outside money.
 
83. Net regulatory burden for FIs is higher because regulators may require the FI to 
 
A. hold more capital than what would be held without regulation.
 
B. produce less information than would be produced without regulation.
 
C. hold more debt than what would be held without regulation.
 
D. hold fewer reserves than they would without regulation.
 
E. All of the options.
 
 
84. What distinguishes financial intermediaries from industrial firms? 
 
A. FI balance sheets are almost totally comprised of financial assets while commercial firms hold substantial amounts of real assets.
 
B. Industrial firms are the customers of FIs, but FIs cannot be customers of industrial firms.
 
C. FIs deal exclusively in primary securities, but industrial firms specialize in secondary securities.
 
D. Industrial firms produce real goods or services while FIs only produce money.
 
E. Industrial firms are unregulated while FIs are heavily regulated.
 
85. The origination of a home mortgage loan is considered to be a 
 
A. primary transaction, because this is the FI's primary source of business.
 
B. secondary transaction, because mortgages are typically resold in the secondary market.
 
C. primary transaction, because the mortgage note is a newly created financial asset.
 
D. secondary transaction if the sale is for an existing home and a primary transaction if it is for a new home.
 
E. derivative transaction because the value of the mortgage note depends on the underlying value of the home.
 
 
86. How have the innovations of global financial networks and computerized money and information transfer systems changed financial intermediation? 
 
A. Financial intermediation has become riskier because it is more difficult to stay informed about worldwide events.
 
B. Financial intermediation has become more costly because it is necessary to invest in high cost technology.
 
C. Financial intermediation has been unaffected.
 
D. Financial intermediation has become more costly as global firms exploit economies of scale and scope.
 
E. Financial intermediation has become less risky as firms become adept at maintaining zero gap positions.
 
87. The charter values of FIs will be higher if regulators 
 
A. increase the cost of entry by requiring more capital.
 
B. restrict the number of activities permitted by FIs, thereby increasing potential profits.
 
C. restrict the number of FIs that can operate in a given market.
 
D. increase the cost of entry by requiring more capital and restrict the number of activities permitted by FIs, thereby increasing potential profits.
 
E. increase the cost of entry by requiring more capital and restrict the number of FIs that can operate in a given market.
 
 
88. In a world without FIs, households will be less willing to invest in corporate securities because they 
 
A. are not able to monitor the activities of the corporation more closely than FIs.
 
B. tend to prefer shorter, more liquid securities.
 
C. are subject to price risk when corporate securities are sold.